DuPont Shareholders Can Afford to Give Nelson Peltz a Board Seat

Trian Fund Management, led by Nelson Peltz, has put forward four nominees for DuPont's board.CreditHeidi Gutman/CNBC

By Kevin Allison

April 28, 2015

DuPont shareholders can afford to give the billionaire activist Nelson Peltz a chance.

The proxy advisory firm Institutional Shareholder Services is backing Mr. Peltz and another of his nominees for the board of the company, which has a $68 billion market value.

The case isn’t strong, but Mr. Peltz has a good track record and a big stake in the company. If investors put just him on the board, he would be able to serve for only a year; after that, it would be up to DuPont to give Mr. Peltz, now 72, a waiver for his age so he can stand for re-election.

I.S.S. stopped short of recommending all four nominees advanced by Mr. Peltz’s Trian Fund Management. It also demurred on the question of whether DuPont should follow Mr. Peltz’s advice and break itself up, arguing that no one “outside the DuPont boardroom” knew whether it was a good idea.

Instead, I.S.S. said the fact that DuPont’s stock price had raced ahead of underlying earnings growth was evidence that the investor was “onto something” when he criticized the company’s performance under its chief executive, Ellen Kullman. That’s a tepid argument for overturning a well-qualified board.

DuPont, naturally, has defended its board and management. In February, the company tried to pre-empt Trian by appointing two highly qualified former chief executives of chemical companies to its board. The proxy fight is, however, continuing as next month’s annual meeting approaches.

When there’s doubt, companies rather than activists probably deserve the benefit of it. In this case, DuPont’s own additions to the board render Mr. Peltz’s extra nominees seemingly unnecessary. But the activist — known for his battles with Kraft Foods, Cadbury and H.J. Heinz — has a reputation as a constructive presence in boardrooms. Trian’s 2.7 percent stake in DuPont, worth about $1.8 billion, gives Peltz the same concerns as many other shareholders, too.

Those voting should consider taking half of I.S.S.’s advice and backing just Mr. Peltz for the board. There’s an added safety valve. By the proxy advisory firm’s analysis, Mr. Peltz can be elected now, but the language of the company’s bylaws means he would be too old to be re-elected next year without a special waiver. He’d be a vigorous new voice at the table, but he could have a finite tenure.

For the sake of ending the public back-and-forth – not to mention gaining from Mr. Peltz’s experience – DuPont might even grudgingly welcome that outcome. For shareholders, it’s worth twisting the company’s arm that far.

Kevin Allison is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

The All-New DealBook

Our columnist Andrew Ross Sorkin and his Times colleagues help you make sense of major business and policy headlines — and the power-brokers who shape them.

Please verify you’re not a robot by clicking the box.

Invalid email address. Please re-enter.

You must select a newsletter to subscribe to.

* Required field

You agree to receive occasional updates and special offers for The New York Times products and services.